Following another volatile earnings reaction, there are plenty of reasons both off and on the price chart to appreciate the upside in biotech giant Biogen Inc (NASDAQ:BIIB). But for like-minded investors, an intermediate-term long call spread continues to seal the deal for this bull. Let me explain.
Sometimes it pays to be patient. Following Biogen’s “key” revenue miss which found ambulance chasers MarketWatch quickly churning out “Biogen stock drops 2% after Q1 sales miss” and Wall Street Journal chiming in with “Biogen Investors Are Losing Patience” Tuesday morning; it’s fitting shares of BIIB stock are aggressively higher.
In the face of the media-driven alarm sirens driven by “weak” sales of Biogen’s Spinraza and its leading multiple sclerosis franchise seeing declining revenues, BIIB stock is up about 10% from Tuesday’s tainted and pooh-poohed low and nearly 6% above Monday night’s close.
At the end of the day, quite literally, at that, Biogen stock investors eventually came to their senses and continue to see things differently.
Bottom line, BIIB stock’s report was an overall strong effort offering a profit beat, overall solid sales growth and very modest revenue drug misses versus forecasts. And for contrarian-minded bulls that also see things at a different angle; Biogen is looking equally good on the price chart.
BIIB Stock Weekly Price Chart
Sometimes it is better to be late, and sometimes prior messages bear repeating as well. Regarding the former on the Biogen stock chart, I personally would rather have been late and missed BIIB’s most recent “Doink” as illustrated on the provided weekly view. Nevertheless, this strategist does see Biogen as a good buying opportunity and in a stronger situation than prior.
Bottom line, if history is any indicator, the abrupt price dip since January is likely a nice spot to pick up shares. BIIB has an inclination to surprise with its price action then fail to make good on continuing with that trend.
This technical habit in Biogen stock seems especially relevant given the terrible performance in shares over the past four years. In our estimation and taking in all the information, Biogen stock is likely due for a firm and meaningful change of heart on Wall Street beyond a couple sessions and positioned to move into a bonafide and lasting uptrend.
BIIB Stock Bull Call Spread
One spread type of interest in Biogen is an out-of-the-money, bullish long call vertical spread. The combination reduces and limits risk and offers an attractive risk-to-reward profile. After reviewing the BIIB options board, the Oct $290/$320 call spread for $8 with shares at $273.86 is a favored position.
This vertical maintains just more than 2% of the risk exposure of buying BIIB stock risk and offers a maximum profit capture of $22 or 275% if shares can reclaim in-between one-half to two-thirds of this year’s rapid price decline. Furthermore, as that kind of price gain would still have Biogen looking less than agreeable to most investments this year and the last few for that matter; that has the earmarks of an all-around winner.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.